Russia: December 19, 2004


The government has put a chill in investor confidence by auctioning off a major part of oil company Yukos. Last year, the government served Yukos with bogus demands for back taxes. The government was unhappy with the political activity of the company's founder, and the tax demands resulted in his jailing, and government dismantling of the company. Russian exports are still primarily raw materials. Russian industry has not yet been rebuilt to modern standards, mainly because of foreign investor reluctance to put money and effort into a country where the government was still prone to arbitrary actions. The Yukos situation has proved the foreign skeptics right, but the government seems unconcerned. Then again, the government believes that it is imposing rule of law on large corporations that got a lot of their assets illegally in the 1990s (when state owned companies were privatized) and were trying to establish their own political parties. Meanwhile, foreign investors are planning to hound the government through foreign courts to recover money lost (because Yukos stock value has declined sharply) by foreign investors because of this tax scam. 


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